MACD indicates fresh sell signal
Nifty forms a long-legged Doji candle and ends indecisively, either side breakout will result in a directional move; Stay neutral and expect more volatility
image for illustrative purpose
The bulls’ efforts to retrace into the green partially succeeded for the day as the selling pressure in the broader has receded. The benchmark index Nifty closed with 32.50 points or 0.15 per cent gain and closed at 21,919 points. The CPSE is the top gainer with 1.09 per cent, and Nifty Metal index is the top loser with 0.79 per cent. All other sector indices gained or lost by less than half a per cent. The India VIX is down by 4.53 per cent to 13.47. The market breadth is negative as 1,449 declines and 1,137 advances. About 64 stocks hit a new 52-week low, and 112 stocks traded in the lower circuit. HDFC Bank, ICICI Bank, SBI, and JioFin were the top trading counters on Wednesday in terms of value.
On another highly volatile day, the Nifty traded over the 220-point range. It closed flat to positive with a relatively low volume. Some of the beaten-down stocks bounced on Wednesday, saving the benchmark index from a decline. On a bounce, it faced resistance at the 50DMA. The intraday bounce did not attract the volume. The Index bounced after it moved below the lower Bollinger bands and the previous day’s low. The Nifty formed another long-legged Doji candle. The recovery was led by Reliance, ITC, and SBI, who together contributed about 42 points to the Nifty’s gain.
Though it closed marginally positive, it closed below the open. The daily and hourly RSI is below 50, hovering around 42 for the last two days. It indicates that the momentum is waned. Interestingly, the MACD has given a fresh sell signal on a weekly chart on Wednesday. Previous week’s bearish engulfing candle almost got the confirmation for its implications unless it closes above the 22,024 points. Another interesting data point is that the market breadth is negative, and more stocks are hitting the new 52-week lows. This shows the weakness in the broader market. For now, a close above the 50DMA or 21,929 is crucial for the Index for a counter-trend consolidation. As the weekly derivatives expiry is scheduled, expect more volatility. Wednesday’s range of 21,719-21,930 is critical for Thursday. Either side breakout will result in a directional move. An inside bar is a higher probability for Thursday. Stay neutral.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
